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Adani role in Jaypee under fire

Tribunal came down hard on banks for their 'backdoor' talks with the Adani group to acquire Jaypee Infratech Limited

By Our Special Correspondent in New Delhi

  • Published 3.07.19, 12:44 AM
  • Updated 3.07.19, 12:44 AM
A Jaypee Infratech project
A Jaypee Infratech project Source: The company's website

The National Company Law Appellate Tribunal (NCLAT) on Tuesday came down hard on banks for their “backdoor” talks with the Adani group to acquire Jaypee Infratech Limited (JIL) even as they rejected state-owned NBCC’s bid for the realtor, which went bankrupt without giving possession to as many as 23,000 home buyers.

A three-member bench led by chairperson Justice S.J. Mukhopadhaya said only NBCC’s plan should be considered at this stage as it was “a government company and one could rely on it”.

The observation by the NCLAT came after the banks requested the appellate tribunal to allow them to call for and consider other bids, including the one by the Adani group as it was offering more money and had promised to complete the pending projects of Jaypee in nine months.

The NCLAT, however, slammed the banks for their “backdoor” negotiations with the Adanis. If the group had a good proposal to finish the project, it should file an intervention application and appear before the appellate tribunal, the three-member bench said.

The Adani group, the appellate tribunal observed, does not have the relevant experience in the infrastructure space and hence should not be considered.

The Adani offer, and other proposals, should be considered only if the resolution plan submitted by NBCC failed to make any headway despite the NCLAT’s intervention, Justice Mukhopadhaya said.

He reiterated that in the interest of home buyers, the resolution of Jaypee Infratech would not be allowed to fail.

The tribunal was informed that in the voting that took place on NBCC’s bid, 34.75 per cent of the home buyers voted in its favour, 1.44 per cent voted against it, whereas 23.8 per cent did not vote.

All the 13 banks, which constitute 40.75 per cent of Committee of Creditors (CoC), voted against the bid by the state-run firm to acquire Jaypee Infratech.

The voting started on May 31 and concluded on June 10. Home buyers have nearly 60 per cent voting rights in the committee of creditors.

Justice Mukhopadhyaya directed the representatives of banks, allottees and other stakeholders to appear before it on July 17 to consider how the bid could be tweaked for the benefit of the home buyers.

It asked the banks to nominate a high-ranking officer who will negotiate, while asking them to produce a gist of the resolution plan submitted by NBCC and the objections they have with regard to the plan.

In its revised offer, NBCC has proposed an infusion of Rs 200 crore equity capital, transfer of 950 acres of land worth Rs 5,000 crore to banks and completing the construction of the flats by July 2023, to settle an outstanding claim of Rs 23,723 crore of the financial creditors.

Apex court hearing

The Supreme Court will hear next week a plea seeking that Jaypee Infratech Ltd not be sent into liquidation. The apex court had on August 9 last year ordered the re-commencement of the resolution process against JIL .

A fresh application in the matter came up for hearing on Tuesday . The plea, filed by one of the home buyers , sought direction that an “independent and thorough forensic audit” of JIL should be conducted from the date of its incorporation.

As many as 13 banks and over 23,000 home buyers have voting rights in the CoC of Jaypee Infratech. Home buyers represent nearly 60 per cent of voting rights, while banks have the rest. For approval of any resolution plan, at least 66 per cent votes should be in favour.

NBCC, while bidding for JIL, had asked to be exempted from income tax liability as well as from taking consent of development authorities for transfer of businesses. It had also not agreed to change its proposal that lenders take unsold flats in case the state-owned firm fails to sell them in the market.

JIL was taken to the National Company Law Tribunal (NCLT) by an IDBI Bank-led consortium for failing to repay debt worth nearly Rs 24,000 crore.

In most bankruptcy proceedings, lenders have the right to vote for or against a resolution plan for a debt-laden firm. In the case of realty firms, home buyers also have voting rights at par with lenders.

Meanwhile, the Supreme Court will hear next week a plea seeking that Jaypee Infratech Ltd not be sent into liquidation although the deadline for the corporate insolvency resolution process is over, as it would cause “irreparable loss” to thousands of home buyers.

The apex court had on August 9 last year ordered re-commencement of the resolution process against JIL and barred the firm, its holding company and promoters from participating in the fresh bidding process.

It had also allowed the Reserve Bank of India to direct banks to initiate corporate insolvency resolution proceedings (CIRP) against Jaiprakash Associates Ltd (JAL), the holding company of JIL, under the Insolvency and Bankruptcy Code (IBC).

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